- Jagdambay Exports Corporation has 10,000,000 shares outstanding and the company is about to issue 5,000,000 new shares in an IPO. The IPO price has been set at $20 per share and the underwriter spread is 7%. The IPO is a big success with investors and the share price rises to $50 the first day of trading. Based on the given information, please answer questions a, b, c, and d.

a) How much did Jagdambay Exports Corporation raise from IPO

b) What is the market value of the Jagdambay Exports Corporation after the IPO?

c) Suppose Jagdambay Exports Corporation could have issued shares directly to investors at their fair market value, in a perfect market with no underwriting spread and no underpricing. What would the share price have been in this case, if Jagdambay Exports Corporation raised the same amount as in question a.

d) Comparing b and c, what is the cost to the firms original investors due to market imperfections from the IPO?

- Hartley, Inc. needs to purchase equipment for its 2,000 drive-ins nationwide. The total cost of the equipment is $2,000,000. It is estimated that the after-tax cash inflows from the project will be $710,000 annually for five years. Hartley has a market value debt-to-assets ratio of 40%. The firm's cost of equity is 13%, its pre-tax cost of debt is 8%, and the flotation costs of debt and equity are 2% and 8%, respectively. The tax rate is 34%. Assume the project is of similar risk to the firm's existing operations. Based on the given information,

a) what is Hartley's weighted average cost of capital?

b) what is Hartley's weighted average floatation costs?

c) What is the NPV for the project after adjusting for flotation costs?

- The table below shows the one-year return distribution of Kam Steel Corporation. Based on the given information, please answer questions a and b

a) What is the expected rate of return?

b) What is the variance? The standard deviation?

Return	Probability
-100%	40%
-75%	20%
-50%	20%
-25%	10%
1000%	10%